Briefing highlights

BMO enjoys told-you-so moment

Investment strategists at Bank of Montreal are enjoying an I-told-you-so moment after the Toronto stock market’s ascent to new heights.

Chief investment strategist Brian Belski has oft called for gains on the benchmark S&P/TSX Composite Index even as it faltered. Now, he has been shown to be right.

“So how did we stick with our forecast for new price highs when odds were so squarely against us?” said Mr. Belski and his colleague, investment strategist Ryan Bohren.

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“Three words: process, discipline and faith.”

The TSX is now within sight of Mr. Belski’s 2019 target of 17,000. He said he’s holding to that call, as he is his bull case scenario of 20,500 and his bear scenario of 14,000.

“Admittedly, the path to new highs for the TSX has been bumpy, doubted and downright belittled, to say the least,” Mr. Belski and Mr. Bohren said in this week’s report.

“To state that nearly no one saw this coming is akin to queuing the broken record of investor pessimism that has defined equity investing for nearly 20 years, in our view,” they added.

“Adding fuel to the negativity is the fact that this ride to new highs has not been easy, with the TSX experiencing more frequent and deeper corrections since the 2009 lows than in all previous bull markets since 1980. Indeed, much of this volatility has come from the inconsistency in emerging market growth and underlying commodities.”

So where do we go from here, according to BMO?

“We have learned that fundamentals and perspective are almost always victorious over macro fears and rhetoric,” Mr. Belski and Mr. Bohren said.

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“Indeed, despite headwinds, TSX earnings continue to hit record highs, and stocks are posting solid returns without the participation of the resource sectors,” they added.

“As such, we believe investors should continue to focus on areas that offer relative stability, strong cash flow generation, and have an increasing exposure to U.S.-centric growth.”

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